COMMISSIONER OF INCOME TAX.-II, CHANDIGARH vs. M/S SAB INDUSTRIES LTD.

ITA/720/2008HC Punjab & HaryanaPHHC01080740200806 May 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI2 pages
AI SummaryDismissed

What were the facts?

The appeal by the Commissioner of Income Tax (CIT) Chandigarh-II challenges an order dated 06.06.2006 passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, for the assessment year 1996-97. The respondent-assessee, M/s SAB Industries Limited, is engaged in construction work. The assessee had declared a net loss of Rs. 2,85,60,913/-. The Assessing Officer (AO) made additions, including disallowing retention money of Rs. 4,15,011/- held by the client pending successful completion of the work. The CIT (Appeals) set aside the AO's disallowance, and this order was affirmed by the ITAT. The revenue is aggrieved by the ITAT's decision.

What did the High Court hold?

The High Court held that there was no substantial question of law arising for consideration. The Court agreed with the consistent view of various High Courts, which held that the right to receive retention money accrues only upon the fulfillment of contractual obligations. Therefore, such retention money does not constitute income for the assessee in the year it is retained. The Court found no reason to interfere with the ITAT's decision, which had affirmed the order of the CIT (Appeals) in setting aside the addition made by the Assessing Officer. The appeal was dismissed.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 4,15,011/- retained by the authorities could not be treated as assessee's income for the year in spite of the fact that income was being assessed on accrual basis? (Question of law) Assessee's Contentions: The assessee argued, relying on various High Court judgments including Commissioner of Income Tax vs. Chanchani Brothers (Contractors) Pvt. Ltd, Commissioner of Income Tax, Simplex Concrete Piles (India) Pvt. Ltd., Commissioner of Income Tax vs. East Coast Constructions and Ind. Ltd, Commissioner of Income Tax vs. Associated Cables P. Ltd, and Commissioner of Income Tax vs. P & C Constructions (P) Ltd., that the right to receive retention money accrues only after the contractual obligations are fulfilled. Therefore, it should not be considered income in the year it is retained. Revenue's Contentions: The revenue's argument is implicitly that the retention money should be treated as income for the year, given that income is assessed on an accrual basis, as stated in the substantial question of law.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 06.05.2013 ITA No. 720 of 2008

Commissioner of Income Tax Chandigarh-II ......Appellant vs. M/s SAB Industries Limited, Sector 26, Chandigarh .....Respondent CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI

Present: - Ms. Urvashi Dhugga, Advocate for the appellant. M/s Akshay Bhan and Alok Mittal, Advocates for respondent. Hemant Gupta, J ....... Present appeal under Section 260-A of the Income Tax Act, 1961 (for short the 'Act') arises out of an order passed by Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh on 06.06.2006 for the assessment year 1996-97. The revenue has claimed following substantial question of law: - “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 4,15,011/- retained by the authorities, could not be treated as assessee's income for the year in spite of fact that income was being assessed on accrual basis”? Respondent-company is engaged in construction work. For the relevant accounting year, the assessee filed its return of income declaring net los

The order continues below.

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